Logindo Samudramakmur Maintain Upbeat View As Results Meet Estimates
Logindo’s 2Q14 net profit jumped 10.4% q-o-q and 70.1% y-o-y to USD6m, pushing its 1H14 net profit 66.2% higher y-o-y to USD12m. This is in line, accounting for 52% of our FY14 net profit assumption. We remain upbeat on the 2015 outlook for the OSV (offshore supply vessel) sector. The stock is now trading at 11.5x and 8.9x FY14-15 P/Es. Maintain BUY and IDR6,300 TP, for a potential 34% price upside.
2Q14 highlights
Logindo’s 2Q14 revenue, gross profit and operating profit growth were relatively flat at +1.6% q-o-q, +2.3% q-o-q, +1.9% q-o-q, while gross and operating margins were relatively stable compared with 1Q14. However, 2Q14’s pre-tax grew 9.8% q-o-q, driven by lower interest expenses during the quarter. The 2Q14 net gearing rose slightly to 110% from 102% in 1Q14.
Lowering exposure to Mahakam block
Logindo’s strong 1H14 66.2% y-o-y earnings growth was mainly driven by its high-tier anchor handling tug supply (AHTS) vessel expansion that began in August 2013. The company sees several potential tenders in the near future, mostly from big offshore water projects.
Diversifying customer base
We applaud the management’s move to reduce its revenue exposure to the declining production field at Total E&P’s Mahakam block to 46.7% in 1H14 from 68.1% in 1H13 in order to reduce concentration risk. In line with our view, Logindo’s exposure to Pertamina Hulu Energy (PHE) rose significantly to 33.4% in 1H14 from 18.4% in 1H13.
Valuation
The stock price has surged 62.4% YTD, outperforming the market by 43.5%. We see improving visibility for 2015 due to further vessel expansion and sturdy capex of ~USD82m amid growing certainty on the political front as the General Elections Commission (KPU) has declared the Jokowi-Kalla team as Indonesia’s president and vice-president. Now that the prospects of energy reform are more visible, we expect more projects to roll out when SKK Migas gets the go-ahead. Maintain BUY call and IDR6,300 TP, with a 2015 target P/E of 12x.
